Lawyer Shao Shiwai's Interpretation | Legal Consequences of Illegal Exchange Currency from the Typical Cases in the Forex Field Released by the Supreme People's Procuratorate

In practice, many people will have such a cognitive misunderstanding: the act of exchanging or introducing foreign currency may be illegal, but it definitely does not constitute a criminal offense; His private exchange behavior is very hidden, and it is easy not to be detected by the judicial authorities; Helping others exchange currency and not making a profit, so it certainly does not constitute an administrative offense or criminal offense; It should not be illegal to sell foreign exchange such as US dollars to others to earn exchange rate differences; I don't care if my family and friends are making money through currency exchange, I just give them my bank card number for free, and I haven't done anything illegal; The customer asked me to help introduce the exchange channel, I happened to know people, so I introduced them to know, and I didn't collect money from it, so there should be no risk; So, are there any legal risks associated with the above behaviors? If it is illegal, how should it be characterized? Is it an administrative offense or a criminal offense? Where is the boundary between the act of exchanging foreign currency and constituting an administrative offense or a criminal offense? On May 8, 2025, the Supreme People's Procuratorate and the State Administration of Foreign Exchange jointly released a typical case of reverse connection of executions in the field of foreign exchange, answering the above questions. This article provides an interpretation of the Guiding Cases released this time. Providing your own bank card to help others collect payments can actually constitute a crime?

In the typical cases released this time, there are 2 instances where the actor provided a bank account to the supplier engaged in illegal Exchange Currency activities to receive funds. So, is this behavior an administrative violation or a criminal offense? How should it be classified? "I am just following my fren's arrangement to help him collect payments. I don’t care how my fren and the supplier connect, and I am not involved in that." Will I have any risks? Case 1: Li Mouyi is suspected of illegal business crimes, and Li Moujia took advantage of his convenience in engaging in Sino-Vietnamese cross-border logistics and transportation services to illegally exchange foreign exchange with Vietnamese Huang. In the process of cooperation between the two, Li Moujia arranged for Li MouB to be responsible for collecting RMB from Chinese customers in China, and then transferred it to Li Moujia, who then transferred money to the bank card in China designated by Huang in exchange for Vietnamese dong. The procuratorate found that Li Mouyi provided assistance to Li Moujia in illegally engaging in fund settlement services and illegal foreign exchange trading, and finally made a decision not to prosecute (constitute a crime) for him because of the relevant mitigating circumstances. The court found that Li Moujia was an accomplice and sentenced him to one year and three months in prison. Lawyer Shao's analysis: In this case, Li Yi actually had a great deal of luck mentality. He might think that he was just helping to collect payments based on Li Jia's instructions, and that these funds were not dirty money, but legitimate payments, so there shouldn't be much risk. However, in reality, he was engaged in helping with forex arbitrage.

"My wife is using my account to help others collect payments. I believe I am not lending my account to strangers, and I am not making a profit. Am I committing a crime?" Case Two: Chen Mouhong and Wu Mourong are suspected of illegal operation crime with reverse connection. Chen Moumou asked her husband Wu Mounlin to register as an individual industrial and commercial household and open multiple personal forex settlement accounts at the bank. Later, in the form of fictitious trade, the above accounts were provided to an underground money laundering gang for receiving forex. After handling the settlement at the bank, the RMB was transferred to domestic accounts designated by the underground money laundering gang, from which handling fees and rebates given by the bank for the settlement were collected. The court believes that Chen Moumou and Wu Mounlin are accomplices, sentencing Chen Moumou to four years and eight months in prison, and Wu Mounlin to one year and ten months in prison with a two-year probation. In addition, Chen Moumou also had her relatives Chen Mouhong and Wu Mourong set up an e-commerce business and open bank settlement accounts with settlement functions for her use. However, the procuratorate considered that these two did not profit and were relatives, determining that they had committed a crime but decided not to prosecute. Lawyer Shao's Analysis: According to the provisions of Article 44, Item 2 of the "Regulations on the Management of Domestic and Foreign Exchange Accounts", lending, using, or transferring foreign exchange accounts can result in a maximum fine of 300,000. However, providing a foreign exchange account does not equal directly engaging in illegal buying and selling of forex. Therefore, in practice, individuals who only provide forex accounts generally only constitute administrative violations and are often not subject to criminal liability. However, in this case, the court found both Chen and her husband guilty of illegal operation and sentenced them to fixed-term imprisonment. Although the decision not to prosecute was made for the two relatives, it is important to note that the prosecution also determined that the two committed a crime, making it a decision of non-prosecution due to minor circumstances (conviction). Lawyer's reminder: Do not provide assistance in setting up a forex account for others out of "goodwill" or "help" to receive payments; otherwise, even if you did not participate in specific illegal exchange currency activities, there may still be legal risks of complicity in the future.

How high is the risk of introducing and helping to Exchange Currency in order to maintain customer relationships or facilitate transactions? Financial practitioners should be cautious of the "introducing exchange currency" minefield - why does providing free assistance to clients in exchanging currency face double penalties? Case 3: Fan, Zhao, and Luo were suspected of illegal business operations, and He Mouwei used the resources accumulated during the promotion of insurance business to open overseas accounts and exchange channels to match and introduce mainland insurance customers with foreign exchange needs, and exchanged RMB with Hong Kong dollars and US dollars for two-way exchange for overseas premiums or domestic investment and consumption. At the suggestion of He Mouwei, Fan and others used the channel of selling overseas insurance to buy and sell foreign exchange in disguised form in the form of "knocking" at home and abroad. For He Mouwei, the court sentenced him to four years in prison and a fine of 4 million. For Fan and others, the procuratorate found that because the circumstances of Fan and others' crimes were minor, a decision was made not to prosecute (constitute a crime) for them. At the same time, for the unprofitable illegal introduction and trading of foreign exchange by Fan and others, in accordance with the foreign exchange management regulations, administrative fines ranging from 1.4 million ~ 2.8 million yuan were imposed. Lawyer Shao's analysis: Based on the experience of Lawyer Shao in handling related cases, one of the common behavioral patterns of illegal foreign exchange trading is that intermediaries facilitate transactions between parties with currency exchange needs, introducing foreign exchange trading. For example, professionals from the immigration industry, overseas property consultants, trust companies, insurance, funds, banks, and other financial sectors often encounter client inquiries about currency exchange channels while performing their primary duties. To maintain client relationships or facilitate transactions, they often act as information intermediaries, providing clients with trading information and introducing foreign exchange trading.

In this case, the insurance industry is mentioned. According to the regulations of the State Administration of Foreign Exchange, each individual in China is entitled to a facilitative exchange currency quota equivalent to 50,000 USD per year. This quota cannot be used for overseas real estate purchases, securities investments, purchasing life insurance, and investment-linked insurance products that are not yet open to capital projects. For example, for mainland residents, if they want to purchase Hong Kong insurance, there will be many restrictions, such as: Any policy not signed locally in Hong Kong (such as domestic proxy signing or proxy payment of premiums) is illegal and must be signed in person in Hong Kong, providing proof such as a Hong Kong and Macau travel permit and entry records to demonstrate that the insurance purchase took place in Hong Kong; personal currency exchange cannot be used for purchasing overseas investment-type insurance (such as participating insurance or universal insurance); some insurance companies require the policyholder to have Hong Kong residency or work status; premiums must be paid directly to the insurance company’s account and cannot be transferred through an intermediary's personal account, otherwise it may be deemed illegal operation; Some insurance agents, for various reasons (such as performance pressure, maintaining customer relationships, and profiting from their own information advantages), help clients exchange currency, either for a fee or for free, or facilitate clients in trading forex through matched transactions. However, this behavior constitutes illegal operation of forex trading, and even if it is a free introduction, it may be recognized by judicial authorities as a minor case not prosecuted and not subject to criminal liability, but they will still face substantial administrative fines. Can Chinese people open private exchange currency companies abroad to avoid domestic legal risks? Why do overseas legal businesses still involve domestic criminal risks? Case 4: Zhao Mouping and Yao Mou are suspected of illegal business crime in the reverse connection case. Yao Moucheng undertook the exchange business of rubles and RMB in Russia, earning forex price differences or service fees, illegally buying and selling over 24 million RMB in forex, and unlawfully profiting 485,000 RMB. The court sentenced him to two years and three months in prison, with a three-year probation, and fined him 500,000 RMB. Lawyer Shao's analysis: I have to vent a bit; this guy is really in a tough spot. He worked in the exchange currency business in Russia for 6 years and only made 485,000, which is just over 6,000 RMB a month. After 6 years, he was implicated in a case and was convicted of illegal operation, receiving a two-year suspended sentence and a fine of 500,000. This means he effectively lost 15,000 after working for 6 years.

In the article "Is it reliable to exchange money with a licensed foreign exchange company? What are the legal risks for currency exchangers, introducers, and exchange companies? (Part 2)" (see image below), Lawyer Shao mentioned that for exchange companies operating in countries or regions without forex controls, as long as they have obtained the relevant qualifications and licenses, there is generally no problem with conducting currency exchange business. Unless the business involves money laundering, they typically will not be investigated by foreign regulatory authorities. In the article "Is it reliable to exchange money with overseas regular licensed exchange currency companies? What are the legal risks for exchangers, introducers, and exchange currency companies? (Part 2)" (see the image below), Lawyer Shao mentioned that exchange currency companies operating in countries or regions without foreign exchange controls, if they have obtained relevant qualifications and licenses, generally have no issues conducting exchange currency business. Unless the business content involves money laundering, they usually will not be investigated by foreign regulatory authorities.

However, China's criminal law is based on personal jurisdiction. In other words, if a Chinese citizen commits an offense against domestic laws while abroad, they will still face criminal legal risks. In terms of exchange currency business, even if one operates a private exchange currency company abroad and has obtained local permits and qualifications, it is certainly legal to operate locally. However, if they deal with domestic money and conduct exchange currency business through "matched transactions," they will inevitably encounter criminal risks. Is there a legal risk in selling foreign exchange such as US dollars and Hong Kong dollars that you have legally earned to others? Is it illegal to resell legal forex? Case 5: A science and technology company suspected of illegal business crimesCriminal reverse connection case From 2017 to 2021, Qi Moumou, a legal person of a freight forwarding company, colluded with a number of enterprises to use agricultural products that cannot be refunded by others to pass off as their own export goods, forged contracts, invoices and other materials, and found Yao Moumou, a legal person of a technology company, to buy foreign exchange (about 113 million yuan) and falsify overseas collection records, so as to defraud the state of export tax rebates of 245 million yuan. Yao Moumou transferred the company's foreign exchange for selling electronic products to Qi Moumou through an overseas account, and assisted in completing the tax fraud at the price of an additional benefit fee of several hundred yuan per 10,000 US dollars. The court convicted Qi of defrauding export tax rebates and sentenced him to life imprisonment. The procuratorate held that there was insufficient evidence to determine that Yao Moumou constituted the crime of illegal business operation, and did not prosecute. Lawyer Shao's analysis: In this case, the main culprit was sentenced to life imprisonment, while the accomplice was acquitted. It is conceivable that the psychological state of the legal person of the technology company in this case must have been like a roller coaster. Although the prosecution ultimately decided not to charge the legal person due to insufficient evidence, the ordeal lasted more than two years from the incident to the verdict. Watching a partner being sentenced to life imprisonment, one must have been constantly wondering how many years they would have to tread on the sewing machine. After the complaints, let's analyze: why does Yao not constitute a crime?

One of the modes of the crime of illegal operation is the reverse buying and selling of forex, which means that the actor, for profit, buys forex at a low price and sells it at a high price to earn the profit margin. However, in this case, all the forex that the actor possesses was obtained from the sale of their products, and not acquired illegally from elsewhere at a low price. Furthermore, their selling purpose was also to exchange currency, rather than to reinvest the proceeds into buying forex again for profit. Therefore, from the perspective of the constituent elements of the crime of illegal operation in the buying and selling of forex, their actions do not constitute this crime. However, Lawyer Shao also wants to remind that personnel from trading companies must not engage in similar behaviors just because the behavior in this case has not been recognized as a crime by the procuratorate. This is because the understanding of this type of model among case handlers is not uniform, and there are indeed cases in practice where such behavior has been recognized as a crime. Moreover, even if it is ultimately determined not to constitute a crime, there is still the risk of administrative penalties. For example, in this case, the technology company was fined 15 million, which is not a small amount. Written at the end As mentioned at the beginning of this article, many people have cognitive misconceptions, believing that their exchange currency activities are very discreet, especially when using the "wash trading" method, thinking that law enforcement agencies cannot detect it. Some people simply believe that even if they are discovered, they will only be fined at most. However, in practice, illegal operations involving buying and selling forex often involve large amounts of money. Once the amount exceeds 25 million yuan or the profit exceeds 500,000 yuan, the parties involved may face a prison sentence of more than 5 years. However, for defense lawyers, as they accumulate experience with this type of case, they often find that for each individual case, there is always a way to seek corresponding breakthroughs and find a certain degree of defense space. Even if the amounts involved are large, it is still possible to strive for a suspended sentence or even achieve a result of non-prosecution.

With the development of financial technology, illegal exchange currency methods have evolved from traditional cash transactions to more covert ways such as virtual currency transactions, smuggling out of the country using POS machines, and fake trade contracts, with the amounts involved becoming increasingly large. Therefore, in recent years, our country has significantly increased its efforts to combat illegal activities in the forex field. Against this backdrop, we cannot be overly optimistic about the future enforcement agencies' efforts to punish illegal activities related to forex. Illegal exchange currency activities can lead to funds being removed from the regulatory system, resulting in abnormal cross-border capital flows, which may trigger issues such as exchange rate fluctuations and foreign exchange reserve losses. Therefore, as individuals, it is essential to abide by the law and not harbor a sense of luck; foreign exchange transactions must be conducted through legal channels. Author of this article: Lawyer Shao Shiwei